Companies with ERP systems are demanding more from their vendors as they seek to extend ERP to other enterprise software. According to a new Aberdeen Group report, "Best Practices in Extending ERP," while 63 percent to 90 percent of extensions to other software applications like CRM, supply chain management, and product life-cycle management are purchased from ERP vendors, relatively low adoption rates signal significant growth opportunities for ERP vendors. Plus, there are opportunities for end users to drive the use of ERP and surrounding applications more deeply and broadly across the enterprise.
As a result of this integration with other enterprise systems, the tradeoff between functionality and ease of integration is no longer as simple as it once was, according to Cindy Jutras, vice president of manufacturing and ERP research at Aberdeen. Over the years ERP has continued to expand, blurring the boundaries of core functionality. The number of modules and the extent of functionality offered in today's ERP suites have steadily grown. At the same time, consolidation within the software industry is having a broad effect beyond ERP itself. ERP vendors such as Infor, Oracle, NetSuite, and SAP have been gobbling up pure play vendors that offer extensions to core ERP.
Functionality is still the key driver of the majority of software decisions (68 percent), but on average companies use only about 43 percent of available ERP functionality, signaling that the right fit is just as important, if not more so, than the number of features and functions available. In addition, size does matter when extending ERP, as small companies favor single vendors while large companies typically work with multiple providers. As a result, larger companies should consider more options and approaches to remain flexible.
According to Jutras, companies considering extending their ERP solution to other applications, either through the purchase of an ERP module or an extension, need to balance the functionality with the impact external functions will have on integration requirements and the ability to upgrade to new releases. About 50 percent of survey respondents said that customization and integration made upgrade costs prohibitive. "While business functionality is of primary importance, companies should also evaluate technology architectures, integration capabilities, delivery models, partner status, support approaches, and ownership and maintenance of customized integration," she says. And while features and functions are generally the key criteria when selecting ERP solutions, for the purpose of extending throughout the enterprise, integration and upgrades "should be just as heavily considered."